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$22,500: The 2023 Thrift Savings Plan IRS Contribution limits for the Traditional TSP and Roth TSP
$6,500: The 2023 IRS contribution limits for the Roth IRA and Traditional IRA
Military Money Manual Podcast Episode Transcript
[00:00:00] Jamie: Hey, podcast listeners. We just wanted to drop a quick update for 2023 IRS limits for your TSPs and your IRAs to make sure everyone's informed, because all limits have increased from 2022 numbers that we've talked about on the podcast throughout the year.
[00:00:15] Spencer: That's right, Jamie. The Thrift Savings Plan or TSP Elective deferral contribution limit is $22,500 for 2023.
For your Roth and traditional Individual Retirement Accounts or IRAs, $6,500 is going to be your 2023 contribution limit. If you want to max out both your IRA and TSP contributions, you'll need to contribute $29,000 for 2023. That could be a pretty high burden, Jamie, if you're just new to the military, but for a lot of military service members that is possible.
[00:00:52] Jamie: But it's at least a good goal to aim towards. Maybe this year in 2023, you can max out an IRA for each spouse and contribute some to your TSP, but you're working towards your limits. The reason the IRS puts a limit on it is because they lose out on their tax dollars.
[00:01:10] Spencer: Yeah, that's right. Jamie.
The IRS limits the contributions because if they didn't, then everybody would throw all their money into there and the government would never get taxes from investments.
If you want to max out your Roth IRA or your traditional IRA in 2023, you'll need to contribute $541.66 cents a month. And then you'll need to top it off with a penny at the end of the year.
And if you want to max out your Roth or traditional TSP, you'll need to contribute $1,875 per month if you start in January. If you wait, you'll need to contribute more obviously, because you'll need to make it up. The other important thing to remember about retirement accounts is your contribution limit is based on the calendar year 1 January to 31 December and it goes away.
And so you don't have the opportunity if you make more money in the following year to go back and contribute in the previous year, except for one caveat, which is that you can contribute to your Roth IRA or traditional IRA up until the date at which you file your taxes, which is usually around 15 April, so you can contribute to a 2022 Roth IRA if you haven't yet.
For instance, up to $6,000 until April 15th, 2023. So that might be good information for someone out there looking to max out their 2022 Roth IRA in 2023.
[00:02:32] Jamie: So remember too that the 5% match under the BRS, the Blended Retirement System version of the TSP does not count against your elective deferral limit.
So you contribute $22,500 maximum, and then the government's 5% match does not count against that matching contribution always goes to your traditional TSP, but you can choose whether you want to contribute Roth or traditional and still receive the matching contribution.
[00:02:58] Spencer: Yeah, and the 5% match, if you maxed out your TSP contributions in 2023 would be $1,125.
Also, another caveat, is if you were deployed to a combat zone or receiving CZTE or Combat Zone Tax Exclusion pay. You can contribute up to the annual additional limit, which is $66,000 for 2023, and the amount over the $22,500 elective deferral limit must go into your traditional TSP. So the most optimal move would be to contribute $22,499 to your Roth TSP and then start contributing to your traditional TSP if that's the route that you want to go. I will say though, that is probably more optimal to put excess contributions above the $22,500 Roth TSP limit into your taxable investments, and I won't get into why that's true, but you can start Googling that and figure that out for yourself.
[00:03:58] Jamie: Awesome. We hope this quick update for 2023 IRS limits on your TSP and your IRA is a quick update for you, helpful, and inform you as you move into the new year. $22,500 for your TSP $6,500 per person. So if you're married, you and your spouse each get $6,500 for your individual retirement accounts or IRAs.
So start planning now for 2023 and crush those savings goals we're cheering for you.